Monday, June 24, 2013

7.23 cent/kWh FIT

Details are still sketchy but it looks like the new subsidy program rolling out in China has some notable qualities.

The NEA requires that the chosen parks should be financed by a single development team, using a ‘self-generate/consume’ model, and that the demand of the subsidies should be no more than RMB0.45/kWh.

The first thing that stands out is that this FiT rate of .45 RMB/kWh (7.23 cents/kWh) is extremely low by comparison to any other market. This FiT is half the rate that China was paying out only last year. Coincidentally this FiT rate is on par with residential retail electricity costs. The parity situation means the Chinese market is just on the edge of a self-consumption driven market. Any further movement up in retail rates and/or movement down in FiT rates gives consumers an incentive to self-consume electricity.

The second notable quality with the new subsidy program is the apparent focus on the "self-generate/consume" model. Perhaps it's no coincidence that the FiT rates were ratcheted down to be on par with retail rates? Maybe these guys actually know what they're doing.